Contributions into and distributions out of entities are generally not taxable events.   

My taxable income does not exceed the limit around $200k. 1.Separate books and records are maintained to reflect income and expenses for each rental real estate enterprise;2.250 or more hours of rental services are performed per year with respect to the rental enterprise; and3.The taxpayer maintains contemporaneous records, including time reports, logs, or similar documents, regarding the following: (i) hours of all services performed; (ii) description of all services performed; (iii) dates on which such services were performed; and (iv) who performed the services.

If the policy is funded past that limit you’ll loose pre-death tax benefits (if you borrow against the policy it can be taxable). 

Does anyone have experience with purchasing, legal issues pertaining to, how to approach taxable owners about the homes, steps involved in an uncommon route to investing?

Not an accountant or cpa but there are many ways to reduce taxable income if you have a business such as paying kids to do some work and make sure you account properly for expenses.

However, when I make a profit I do have to pay taxes, so if you are trying to reduce your taxable income this may not be what you want.3. 

Vs. if it's a state with tax you will pay state tax thereYou're taxed based on where your income is earned - LLC location doesn't impact taxable income 

And finally Lender D said I can close with my name and transfer to an LLC, but this may trigger a taxable event, the bank may call the loan (like Lender B said), or an increase in the rate from residential rates to commercial rates may take place or may not even allow the title transfer to an LLC.

Normally this boot would be taxable but since you qualify for the 121 exemption your accountant files the appropriate form with your tax return and that $500K is tax free.Meanwhile the remainder of the gain ($300K ish) and all depreciation recapture go into the 1031.  

Converting that property by changing the use of it does not create a taxable event.